Who Needs a Femtocell?

During the last presidential election, two major mobile phone carriers parked portable antennas at John McCain's Arizona ranch, as it was out of range of the nearest tower. If you live in a dead spot, you can get a smaller portable antenna for your home that will do the same thing. But does anyone really need one of these things?

It's called a femtocell, and it's a little device the size of a Wi-Fi router that has become something of a media darling: make your own little cell phone network in your home! Easy! Convenient! The future of wireless!

The racket works like this: if you get poor signal at your home, you can buy a femtocell from Verizon or Sprint (an AT&T version may be coming soon) for between $100-$250, plus a monthly fee. You plug the femtocell into your broadband Internet connection, and voila: you get 3G speeds on your cell phones in an area of about 5,000 square feet.

Yes, you have to pay extra because your cell network doesn't reach your house. "For most of us, we expect coverage to be part of the deal," says Steve Shaw, executive vice president of corporate marketing at Kineto Wireless. Kineto makes the software that is baked into some brands of femtocell, allowing them to convert cell signals into broadband data. (T-Mobile also uses their software in some of their VoIP applications.)

From the network operator's perspective, the only decent alternative to selling femtocells is to use Wi-Fi to allow consumers to connect their phones to their home broadband networks directly. This is the approach T-Mobile has taken with some of its BlackBerry models, but other carriers have opted to use femtocells as a sort of band-aid to dead zones, instead of trying to work Wi-Fi calling into all of their devices. "Undoubtedly, the operator is the one that benefits from people using femtocells," says Shaw. "They have these colossal cell towers that cover as much territory as possible, but there are always going to be nooks and crannies where it doesn't make sense to build a tower to cover the gap." Femtocells give subscribers an easy way to solve their frustrations, and the carrier makes a few bucks in the process.

But the question, Shaw says, how many people are really willing to pay for them? "How sucessful can a vendor be with a model like Verizon's, where the customer has to shell out 250 bucks? Sure, they'll sell a few. But not millions."

In addition to the cost, femtocells have significant drawbacks. For one, they operate on the same frequency as the cell network they serve, meaning that they can cause severe interference. "If you live next door to someone with a femtocell, and their house is between you and the cell tower, you won't be able to get access to the tower," Shaw says. And forget about being able to connect to their femtocell; device owners can restrict service to only certain numbers, and each femtocell can only support about three or four calls at a time, so coverage is a valuable resource.

Most femtocells also come with GPS modules that restrict where you can use them. That makes placing a femtocell in your house a little bit of a cat-and-mouse game; put it in the basement, or in the bay window with the tin roof, and the GPS can't connect, rendering your femtocell useless. You might end up having to stick it in your bedroom—but what if you don't have hard-wired Ethernet there?

Shaw says that if you were to sit down and design the perfect femtocell, you'd basically end up with a Wi-Fi router that can connect to cell phones. "WiFi is extremely inexpensive, it's ubiquitous, and it's even in the places that you travel outside the US," he says. "All the trends are leading towards WiFi. The only downside is that you need a phone that has it," he says.

So why did femtocells come along at all, if Wi-Fi is so superior? "Wi-Fi used to be viewed as this colossal threat to the mobile operators, because they thought VoIP would eat into their revenues," Shaw says. But as operators now know, they can actually make money on phones like the Blackberry and the iPhone that include Wi-Fi and use it to offload some of the huge amounts of data they stream. "What's really driving femtocells is the network planners, who say, 'Look! I can cover these dead spots!' But everyone else is asking, what's the business case? What are consumers going to buy?"

Femtocells do have a place in the world, Shaw asserts, but not one that lives up to the cachet they've recently acquired. "There's as much art as science in laying out a network," he says. "They need to make femtocells play nice with the macro network." If femtocell makers can achieve interoperability, the modules could someday be built into everyday Wi-Fi routers just like Bluetooth, giving consumers just another option for connectivity.